A, B and C are partners sharing profits in the ratio of 5 : 4 : 3. B retires and A and C decide to share future profits in the ratio of 2 : 1. It was decided to adjust B’s share of goodwill in the accounts of continuing partners. Fill in the missing figures in the following journal entry. Also find the total goodwill of the firm.
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step 1st gain = new share - old share
A = 2/3 - 5/12 = 3/12
C = 1/3 - 3/12 = 1/12
gaining ratio = 3:1
C's contribution = 8,000 out of 4 is 1
therefore A's contribution = 8,000×3/1 = 24,000
both contribution = 24,000 : 8000 = 24:8 or 3:1
Therefore entry =
A's capital account..... Dr 24,000
B's capital account..... Dr 8,000
to C's capital account 32,000
2nd
A's capital account.... Dr. 35,000
B's capital account... Dr. 28,000
C's capital account.. Dr. 21,000
to goodwill account 84,000
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